What Does the Budget Mean for Online Retail

Over the past few weeks, speculation flooded boardrooms and businesses across the country as the Chancellor, Rachel Reeves, prepared to deliver the Government’s latest Budget. Any drastic cuts to government spending or tax hikes would be felt by SMEs and conglomerates alike, prompting stakeholders to await Reeves’ Budget with bated breath.  

This nervousness was perhaps most prominent amongst online retailers, entering the most important few weeks of the shopping calendar which is headlined by Black Friday. With that in mind, Wednesday’s announcement had the potential to disrupt their year end and make the business of retail even harder. 

But what does the Budget announcement mean for retailers? And should you change your plans for Black Friday? We’re here to answer all your questions.  

What was Announced in the Budget?

Due to an apparent technical error over at the Office for Budget Responsibility (OBR), we had a good idea of what the Chancellor would be announcing before she took her place in the dispatch box at the House of Commons.  

While a new tax for homes over £2m and the removal of the two-child benefit cap for universal credit are likely to grab headlines amongst the public, the freeze in income tax thresholds until April 2031 means that employees can expect to pay more tax as their pay increases. 

Salary-sacrifice pension contributions above an annual £2,000 threshold will now no longer be exempt from national insurance contributions from April 2029, adding to an increase in overall tax which is expected to rise to an all-time high of 38% of GDP in 2030-31.  

Elsewhere, real GDP is expected to grow, just not at the rate anticipated back in March, as the OBR’s forecast for the underlying rate of productivity growth in the medium term has been cut.  

What Does This Mean for Retailers?

Business all over the UK, not just online retailers, will be relieved to know that much of Reeves’ Budget won’t take effect for a number of years, with the short-term pressure and speculation somewhat alleviated. However, the freezing of income tax thresholds is likely to cause concern amongst retailers and their employees.  

With a rise to the national living wage also announced this week, more employees can expect a pay rise, not just those on lower wages. Any pay rise which takes an employee’s annual salary above £50,271 will incur a higher level of taxation. However, VAT rates remain frozen at 20%, keeping the price of goods competitive. 

Fuel duty has been frozen until September 2026, which is good news for online retailers looking to keep delivery costs down and maintain competitive pricing compared to other businesses. With the reform to rental rates for physical retailers potentially set to keep the costs of running a shop low, this announcement suggests that the Government is committed to British business.  

Impacting how individuals invest their income, Reeves also announced that the amount of money that people can deposit into cash ISAs tax-free will be lowered from £20k to £12k, freeing up funds previously locked in savings to theoretically be invested into British businesses through increased consumer spending and growing stock activity. 

How Could the Budget Affect Black Friday?

The timing of this Budget with major sales milestones looming is far from ideal for retailers. Any mention of budgets naturally triggers a tightening of purse strings across the country.  

Consumer Behaviours After the Budget

With impending tax rises and uncertainty with how their payslips may change over the coming years, consumers may be approaching Black Friday with hesitation, with fears of less money in their pocket hitting consumer confidence. 

Rises to national living wage and state pension payments, both in line with inflation, will give certain sections of consumer’s confidence that their income is safe for now. This means they may continue with their festive spending as usual, despite any trepidation that may have been felt in the runup to Reeves’ speech.  

How should retailers approach Black Friday after the Budget?

With everything getting started this week, it’s unlikely that you’ll have time to account for any adjustments to your strategy for Black Friday. However, there’s also no need to make any major changes now as the Budget strived to maintain the status quo over making sweeping changes.

Consumer confidence may drop amongst those who fear changes to their income may be on the horizon, but Black Friday still promises to be one of the busiest days on the retail calendar.

Similarly to how consumers may be looking a bit closer at their spending after the budget, retailers will also be looking at their outgoings each month to prepare for any adjustments as the market responds to Wednesday’s announcement. Coming out of the busiest, most competitive period for ad spend, businesses may be thinking about ways they can make the most of their budget. 

The announcement of a new Budget can bring equal parts of hope and hesitation to businesses, and the full impact of Wednesday’s announcement is yet to be understood. However, with the pound rising and the UK market predicted to grow, the future looks to contain more of the same for retailers across the country. 

Get in touch with the Productcaster team today for more insights, updates and support.